Doesn't sound like KSA will be replicating the US's huge increase anytime soon.Riyadh - hampered by scarce water and prices fixed far below production costs - is unlikely to produce much shale gas this decade.
kublikhan wrote:From the article:Doesn't sound like KSA will be replicating the US's huge increase anytime soon.Riyadh - hampered by scarce water and prices fixed far below production costs - is unlikely to produce much shale gas this decade.
I never said it did? The rigzone article is claiming the fixed low sales prices of natural gas in KSA will act as an impediment to fracking. Here's an article that delves into the subject in more detail if you are interested:2. The current price of NG outside the US doesn't reflect NG production costs anymore than the international price of BRENT oil reflects KSA oil production costs. The NG price is largely driven by Russia's monopoly over NG sales to Europe and has nothing to do with NG production costs in KSA.
Saudi faces gas cost dilemmaThe government of Saudi Arabia will lose millions of dollars a day tapping into much-needed new gasfields because of rigidly low domestic prices, according to the International Energy Agency (IEA). Rapidly increasing electricity consumption and industrial development has led Saudi Aramco, the state oil company, to scramble to develop new natural gas reserves - with many significant successes.
But the cost of developing those fields overshadows the revenue the company will receive from selling the gas to power producers and petrochemical outfits at fixed prices, according to new estimates by the IEA. The cost of extracting a million British thermal units (BTUs) of gas from the new offshore Karan gasfield will be about US$3.50 (Dh12.85), the IEA said, while the domestic sales price for that same gas is fixed by the Saudi government at US 75 cents. The cost of producing gas from the more difficult Arabiyah field will be even higher, up to $5.50 per million BTUs, the IEA estimated.
The two fields will together produce 2.8 billion cubic feet per day of gas (cfd), according to Saudi Aramco's forecasts, leading to average daily losses of more than $8 million if consumer prices are not increased and the cost of the field developments is not reduced. In Saudi Arabia and across the region, the IEA said, "there is greater realisation that additional gas deposits are going to come in at costs much higher than in the past, and if domestic prices remain artificially low, a way must be found for the government or the national oil company to bridge the gap"
In a recent exploration round for gas in the country's south-eastern Empty Quarter by foreign companies, "it proved impossible to develop any reserves at a cost anywhere near the Saudi domestic selling price", the IEA noted. The Saudi government has been reluctant to increase gas prices for fear of hurting the international competitiveness of the country's petrochemical industry and the bottom lines of power producers, who sell electricity at fixed prices.
ROCKMAN wrote:Which does bring the mind the effort to develop gas to liquid plants here in the US for a similar reason.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
I suspect they will start efficiency and conservation improvements soon, no sense in burning up the profits.
Royal Dutch Shell has admitted that its search for gas in Saudi Arabia has been a decade-long wild goose chase, dashing any hopes of gaining a prized upstream foothold in the kingdom.
“We haven’t had a very successful exploration campaign,” Andrew Brown, director of upstream international business at Shell, told The Sunday Telegraph in an interview. “We aren’t conducting any operations there [at Rub al-Khali desert] at the moment.”
Mr Brown declined to specify whether the failure of exploration in the desert – where sand dunes can tower 1,000ft high and temperatures can hit 122F – would force it to shutdown the South Rub al-Khali Company (SRAK), its joint venture with state-owned producer Saudi Aramco.
The announcement on its activities in the Rub al-Khali comes as Shell – Britain’s most valuable company by market value – aggressively cuts costs. In January, Shell said it aimed to raise about $15bn (£8.7bn) from asset sales and cut capital spending to $37bn this year from $46bn in 2013.
No work has taken place in the area since the company said it had stopped drilling in February. Exploration has been plagued by delays and the cost of working in such an environment.
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